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! Our$company$
• Operates$commercial$satellites$
• Sells$bandwidth$to$communica6ons$companies$
• Faces$demand$growth$at$about$5%$per$year$
! Situa6on:$
• 10$satellites$will$re6re$between$2017@2021$
! Objec6ve:$
• Develop$a$replacement$plan$ 3$
SataLink’s$priori6es$
! Maximize$net$present$value$
! Supply$all$forecasted$demand $$
! Plan$for$the$unexpected$$
• Launch$failure$
• Low$market$growth$
! Generate$posi6ve$cash$flow$
! Improve$company$credit$ra6ng$
SataLink’s$business!$
Low@risk$contracts$
Strong$earnings$
Meanwhile,*Boeing*wants..*
Figure 1
4$
! Made$assump6ons$for$our$first$aSempt$
• No$launch$failures$
• Market$grows$at$expected$rate$
• Constant$market$share$
! Itera6vely$adjusted$plan$to$meet$real@world$condi6ons$
• Added$resilience$to$launch$failure$$
• Added$resilience$to$low$market$growth$
• Op6mized$cash$flow$and$debt$
! Researched$addi6onal$opportuni6es$ 5$
2017 2018 2019 2020 2021
Americas 418 439 461 484 508
Europe 315 329 344 359 375
Middle East & Africa 51 54 57 60 64
Asia & Australia 272 286 300 315 331
Figure 2 6$
! Looked$at$the$problem$from$a$customer$point$of$view$• Projected$transponder$demand$in$each$region$
2017 2018 2019 2020 2021
Americas -108 -129 -221 -244 -318
Europe -55 -139 -154 -169 -185
Middle East & Africa -1 -4 -7 -60 -64
Asia & Australia 8 -66 -130 -145 -241
Figure 3 7$
! Looked$at$the$problem$from$a$customer$point$of$view$• Projected$transponder$demand$in$each$region$• Calculated$deficiencies$in$supply$
2017 2018 2019 2020 2021
Americas 800M 1000L 1000L
Europe 1000L 800M
Middle East & Africa 800M
Asia & Australia 800M 1000L
Figure 4 8$
! Looked$at$the$problem$from$a$customer$point$of$view$• Projected$transponder$demand$in$each$region$• Calculated$deficiencies$in$supply$• Selected$satellite$models$that$best$meet$demand$
9$
Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,
Posi6ve$Cash$Flow$Through$2025$
Resilience$to$Plausible$Launch$Failure$
Resilience$to$Low$Market$Growth$
Debt$Reduc6ons$
! Chances$that$launches$will$fail$• 43%$that$no$launch$failures$will$occur$• 96%$that$two$or$fewer$failures$will$occur$
" We$can$make$our$plan$96%$resistant$to$launch$failure!$$
! Worst$reasonable$scenario:$two$launch$failures$• NPV:$$2.71$Billion$• Nega6ve$cash$flow$$
! Explored$3$alterna6ves$to$mi6gate$nega6ve$impacts$of$a$launch$failure$• Use$smaller$satellites$• Order$backup$satellites$• Launch$the$satellites$early$for$extra$capacity$ 10$
Starting with our preliminary plan…
2017 2018 2019 2020 2021
Americas 800M 1000L 1000L
Europe 1000L 800M
Middle East & Africa 800M
Asia & Australia 800M 1000L
Figure 5 Expected NPV: $5.22 Worst-case NPV: $2.71 [In billions] 11$
Our first alternative deploys more small satellites.
2017 2018 2019 2020 2021
Americas 800M 1000L 3 x 600S
Europe 2 x 600S 600S 800M
Middle East & Africa 800M
Asia & Australia 800M 1000L
Expected NPV: $5.03 Worst-case NPV: $4.14 [In billions]
Figure 6
12$
Our second alternative orders backup satellites.
2017 2018 2019 2020 2021
Americas 800M 1000L 1000L
Europe 1000L 800M
Middle East & Africa 800M
Asia & Australia 800M 1000L
1000L 1000L Figure 7
Expected NPV: $4.42 Worst-case NPV: $2.84 [In billions] 13$
Our third alternative launches extra capacity early.
2017 2018 2019 2020 2021
Americas 1000L 1000L 800M
Europe 1000L 800M
Middle East & Africa 800M
Asia & Australia 1000L 800M
Figure 8 Expected NPV: $5.14 Worst-case NPV: $5.10 [In billions] 14$
15$
2017 2018 2019 2020 2021
Americas
1000L 1000L
Europe
800M
Middle East & Africa
Asia & Australia
Figure 9: An animation to develop the final plan.
800M
1000L
1000L
1000L
800M
1000L
800M
! Launching$replacements$as$soon$as$possible$helps$reduce$risks.$
! Average$transponder$fill$rate$(75%)$remains$compe66ve$with$other$compe6tors.$
$
! Purchasing$our$satellites$early$ensures$bandwidth$service.$
15$
16$
Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,
Resilience$to$Plausible$Launch$Failure$
Resilience$to$Low$Market$Growth$
Posi6ve$Cash$Flow$Through$2025$
Debt$Reduc6ons$
! Several$forces$impact$the$growth$rates$in$each$region:$
! We$need$a$plan$that$works$well$in$any$market$ 17$
Americas* Opportuni4es, Threats,
• Corporate$globaliza6on$• 4k$HDTVs$• Broadband$growth$(La6n$America)$
• Streaming$services$• Fiber$op6cs$
Europe* Opportuni4es, Threats,
• 4k$HDTVs$ • Streaming$services$• Fiber$op6cs$
Middle*East*&*Africa* Opportuni4es, Threats,
• Growth$of$TV$market$• Cellular$phone$adop6on$
• West$Africa$Cable$System$
Asia*&*Australia* Opportuni4es, Threats,
• Corporate$globaliza6on$• Cellular$phone$adop6on$• New$TV$content$• 4k$HDTVs$
• Streaming$services$• Fiber$op6cs$
Figure 10
Our$NPV$is$sensi6ve$to$market$growth$rates,$$but$adequate$in$all$probable$scenarios.$
! Case:$Market$Growth$increases$by$7%/year$through$2025.$• NPV:$$7.27$Billion$• Generates$Posi6ve$Cash$Flow$
! Case:$Market$Growth$increases$by$3%/year$through$2025.$• NPV:$$3.40$Billion$• Generates$Posi6ve$Cash$Flow$
18$
! We$can$change$the$launch$plan$over$6me:$• Move$satellites$later$
× Exposes$SataLink$to$launch$failure$risks$• Cancel$satellite$in$2020$if$necessary$
× Fails$to$account$for$market$changes$ajer$2017$
! We$can$improve$our$corporate$strategy:$• Maintain$geographically$diverse$customer$base$
" Ensures$that$SataLink$will$grow$even$if$one$market$fails$
• Invest$in$fiber$op6cs$" Guarantees$SataLink$will$serve$exis6ng$
customers$in$an$unpredictable$market$19$
20$
Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,
Resilience$to$Plausible$Launch$Failure$
Resilience$to$Low$Market$Growth$
Posi6ve$Cash$Flow$Through$2025$
Debt$Reduc6ons$
2014 2015 2016 2017 2018 2019 2020 2021
Operating Cash Flow $851 $930 $1012 $1089 $1179 $1283 $1380 $1495
Purchase Expenses (368) (535) (603) (670) (370) (203) (135) (68)
Interest Expenses (293) (293) (293) (293) (293) (293) (293) (293)
Net Cash Flow $191 $102 $117 $126 $517 $788 $953 $1135
Our$CF$outlook$is$strong$even$if$we$choose$not$to$pay$off$our$debt.$" Model$assumes$debt$level$remains$at$$3.25$billion$through$2021$" Generates$posi6ve$cash$flow$every$year$" Don’t$need$to$borrow$money$to$finance$the$new$satellite$purchase$plan$
Figure 11
Strong Cash Flow
21$
22$
Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,
Posi6ve$Cash$Flow$Through$2025$
Resilience$to$Plausible$Launch$Failure$
Resilience$to$Low$Market$Growth$
Debt$Reduc6ons$
! Goal:$Improve$SataLink’s$credit$ra6ng$
• BeSer$in$the$eyes$of$stockholders,$suppliers,$and$customers.$
• Higher$company$valua6on.$
• In$the$future,$less$risk$means$that$we$can$borrow$at$lower$
interest$rates$(if$we$need$to).$
! Op6on$to$reduce$debt$to$zero$by$2021$
• Not$necessary,$but$shows$power$of$plan$
• Targeted$coverage$ra6o*$of$FCF/Total$Debt$≥$5%$
23$*FCF$is$conserva6ve$(Opera6ng$cash$flow$minus$capital$expenditures).$
2013 2014 2015 2016 2017 2018 2019 2020 2021 NPV
Option A
2850 2721 2667 2591 2498 1998 1298 498 0 5149
Option B
2750 2050 1250 0 5038
Debt Level and associated NPV (in millions)$
! Reduce$the$debt$level$sooner$rather$than$later,$for$less$interest$payments.$• Surprisingly$improves$the$Net$Present$Value$(NPV).$• Why$were$we$paying$so$much$in$interest?$• Might$be$due$to$poor$credit.$We’ll$improve$credit$and$refinance.$
Figure 12
24$
25$
Checkpoints,1.4:,Itera4ons,for,sensi4vity,analysis.,
Resilience$to$Plausible$Launch$Failure$
Resilience$to$Low$Market$Growth$
Posi6ve$Cash$Flow$Through$2025$
Debt$Reduc6ons$
Our$final$plan,$as$shown$on$slide$15,$meets$all$high@level$priori6es.$
! SataLink$will$have$$4$billion$in$cash$by$2021$! Maximize$“Space$Real$Estate”$
• Beneficial$due$to$high$profit$margins$in$industry$
• Op6on$1:$Acquire$smaller$compe6tors$
" SataLink$will$aSain$valuable$orbital$slots$• Our$recommenda6on:$Space$Com$(TASE:$SCC)$
• Market$cap:$$1.3$billion$
• Allows$expansion$in$African$market$
• Op6on$2:$Engage$in$price$war$to$capture$customers$
� Might$lose$to$compe6tors$with$larger$market$shares$26$
! Enter$fiber$op6cs$market$
• Allows$SataLink$to$take$advantage$of$exis6ng$rela6onship$
with$communica6ons$companies$
• Op6on$1:$Acquire$Ciena$Corpora6on$(CIEN)$
• Market$cap:$$2.3$billion$
• Provides$fiber$op6c$bandwidth$to$similar$customers$
• Op6on$2:$Acquire$Infinera$Corpora6on$(INFN)$
• Market$cap:$$1.0$billion$
• Provides$fiber$op6c$systems$to$similar$customers$
27$
! The$As,Soon,As,Possible,launch$plan:$
$
$
$! Addi6onal$strategic$recommenda6ons:$
• Maintain$geographically$diverse$customer$base$• Pay$back$debt$early$• Acquire$a$smaller$satellite$provider$such$as$Space$Com$• Acquire$a$fiber$op6cs$provider$such$as$Ciena$Corpora6on$ 28$
2017 2018 2019 2020 2021
Americas 1000L 1000L 800M
Europe 1000L 800M
Middle East & Africa 800M
Asia & Australia 1000L 800M
Figure 13
Labrador,*Virgil.*“Trends*to*Watch*(2014).”*Satellite'Markets'and''Research.*SpaceconnecIon,*Jan.*2014.*Web.*25*Jan.*2014.**Discusses$poli6cal$and$economic$forces$in$today’s$satellite$$industry.$
McClure,*Ben.*“Cash:*Can*a*Company*Have*Too*Much?”**Investopedia.*2010.*N.*pag.*Print.*Explains$good$and$bad$$reasons$for$firms$to$hold$extra$cash.$The$appropriate$amount$$depends$on$the$industry.$
“Satellite*Telecom*Companies.”*Bloomberg'Markets.*Businessweek,**n.d.*Web.*25*Jan.*2014.$An$online$lis6ng$of$SataLink’s$real@$world$counterparts.$Includes$financials$of$Echostar,$Eutelsat,$$Loral$Comm.,$Globalstar,$etc.$
“2012*Annual*Report*–*Intelstat.”**Intelstat'Investor'Rela9ons.,,28$$Feb.$2013.$$Web$25$Jan.$2014.$$Details$opportuni6es$and$$threats$for$satellite$industry,$as$well$as$customer$$segmenta6on.$ 29$
Spencer$Graham@Thille$@[email protected]$
Jennifer$Sheriff$@[email protected]$
Bach$Dang$@[email protected]$
Yousif$Kurdi$@[email protected]$$
30$
Acknowledgements: Jose Arche (Team mentor) Steve Pierce (First Audience)